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CERAGON NETWORKS REPORTS SECOND QUARTER 2015 FINANCIAL RESULTS

August 13, 2015

Paramus, New Jersey, August 13, 2015 - Ceragon Networks Ltd. (NASDAQ: CRNT), the #1 wireless backhaul specialist today reported results for the second quarter which ended June 30, 2015.

Second Quarter 2015 Highlights:

Revenues - $94.8 million, up 4.8% from the second quarter of 2014, and up 1.2% from the first quarter of 2015.

Gross margin - 28.2%, compared to 26.3% in the second quarter of 2014 and 25.9% in the first quarter of 2015.

Operating income - $5.9 million, compared to $11.8 million in the second quarter of 2014, which included $16.8 million of non-recurring other income, and compared to $0.6 million in the first quarter of 2015.

Net income (loss) – Net income of $1.3 million, or $0.02 per diluted share for the second quarter of 2015. Net income for the second quarter of 2014, including non-recurring other income, was $8.0 million, or $0.15 per diluted share. Net loss for the first quarter of 2015 was $(7.0) million or $(0.09) per diluted share.

Non-GAAP results- gross margin was 28.6%, operating profit was $6.7 million, and net income was $3.0 million, or $0.04 per diluted share. For reconciliation of GAAP to non-GAAP results, see the attached table.

Cash and cash equivalents- $39.5 million at June 30, 2015, compared to $37.3 million at March 31, 2015.

“We reached a very important milestone in the second quarter by clearly restoring our financial stability with solid profitability and positive cash flow,” said Ira Palti, president and CEO of Ceragon. “More important, we are much more confident that we can continue the trend of profit improvement.

“Reaching our initial financial targets more quickly than expected demonstrates the effectiveness of our strategic initiatives aimed at capitalizing on our best-of-breed technology and global reach by focusing on high-value opportunities worldwide with telecom carriers and private network operators seeking best-of-breed solutions. Now, as we continue to refine our strategy and improve our execution, we are setting new, higher profit goals for the company.”

Supplemental geographical breakdown of revenue for the second quarter of 2015:

  • Europe:                     12%
  • Africa:                        8%
  • North America:          18%
  • Latin America:           22%
  • India:                        30%
  • APAC:                       10%

A conference call to discuss the results will begin at 9:00 a.m. EDT. Investors are invited to join the Company’s teleconference by calling USA: (800) 230-1059 or International: +1 (612) 234-9959, from 8:50 a.m. EDT. The call-in lines will be available on a first-come, first-serve basis.

Investors can also listen to the call live via the Internet by accessing Ceragon Networks’ website at the investors’ page, selecting the webcast link, and following the registration instructions.

If you are unable to join us live, the replay numbers are: USA: (800) 475-6701 or International +1 (320) 365-3844 Access Code: 363874. A replay of both the call and the webcast will be available through September 13, 2015.

About Ceragon Networks Ltd.

Ceragon Networks Ltd. (NASDAQ: CRNT) is the #1 wireless backhaul specialist. We provide innovative, flexible and cost-effective wireless backhaul solutions that enable mobile operators and other service providers to deliver 4G/LTE, 3G/2G, and other wireless broadband services to their subscribers with high quality of experience. Our solution are deployed by public utilities, government and defense organizations for delivering mission critical multimedia and other applications at high reliability and speed. Ceragon’s high-capacity solutions use microwave technology to transfer multimedia, voice and data traffic while maximizing bandwidth efficiency, to deliver more capacity over longer distances under any deployment scenario. Based on our extensive global experience, Ceragon delivers turnkey solutions that support service provider profitability at every stage of the network lifecycle enabling faster time to revenue, cost-effective operation and simple modernization to all-IP networks. As the demand for multimedia services pushes the need for ever-increasing capacity, Ceragon is committed to serve the market with unmatched technology and innovation, ensuring effective solutions for the evolving needs of the marketplace. Our solutions are deployed by more than 430 service providers in over 130 countries.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except share and per share data)

(Unaudited)

   

Three months ended

June 30,

 

Six months ended

June 30,

 
   

2015

 

2014

 

2015

 

2014

                 
                 
Revenues  

$     94,772

 

$     90,420

 

$     188,425

 

$     160,935

Cost of revenues  

68,078

 

66,607

 

       137,491

 

       121,543

                 
Gross profit  

26,694

 

23,813

 

50,934

 

39,392

                 
Operating expenses:                
Research and development  

         5,770

 

         8,454

 

12,169

 

18,893

Selling and marketing  

9,481

 

14,655

 

       20,789

 

       30,075

General and administrative

Restructuring costs

 

5,525

-

 

5,720

-

 

10,261

1,225

 

11,626

936

Other income  

-

 

16,800

 

         -

 

16,800

                 
Total operating expenses  

 $    20,776

 

 $    12,029

 

 $    44,444

 

 $    44,730

                 
Operating income (loss)  

5,918

 

11,784

 

 6,490

 

 (5,338)

                 
Financial expenses, net  

3,161

 

2,175

 

        9,507

 

        10,339

                 
Income (loss) before taxes  

2,757

 

9,609

 

(3,017)

 

(15,677)

                 
Taxes on income  

1,426

 

1,611

 

2,647

 

3,288

                 
Net income (loss)  

  $      1,331

 

  $      7,998

   $   (5,664)    $   (18,965)
                 
Basic net income (loss) per share  

$     0.02

 

$     0.15

 

 $      (0.07)

 

 $      (0.36)

Diluted net income (loss) per share  

$     0.02

 

$     0.15

 

 $      (0.07)

 

 $      (0.36)

                   
Weighted average number of shares used in computing basic net income (loss) per share  

77,170,030

 

52,457,168

 

77,158,982

 

52,457,168

Weighted average number of shares used in computing diluted net income (loss) per share  

77,243,249

 

52,861,134

 

77,158,982

 

52,457,168

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

   

June 30,

2015

 

December 31, 2014

ASSETS  

Unaudited

   
         
CURRENT ASSETS:        
Cash and cash equivalents  

$    39,535

 

$    41,423

Short-term bank deposits  

353

 

      413

Marketable securities  

-

 

535

Trade receivables, net  

      138,110

 

      162,626

Deferred taxes, net  

25,186

 

22,898

Other accounts receivable and prepaid expenses  

2,085

 

3,522

Inventories  

51,337

 

61,830

Total current assets  

256,606

 

    293,247

         
NON-CURRENT ASSETS:        
   Deferred tax assets, net  

103

 

239

   Severance pay and pension fund  

5,327

 

5,669

   Property and equipment, net  

30,646

 

33,138

Intangible assets, net  

4,300

 

5,070

   Other non-current  assets  

3,681

 

4,510

Total non-current assets  

44,057

 

48,626

Total assets  

$      300,663

 

$      341,873

 

LIABILITIES AND SHAREHOLDERS' EQUITY

       
 

CURRENT LIABILITIES:

       
Short term loan, including current maturities of long term loan  

$    50,988

 

$    48,832

Trade payables  

81,491

 

    101,752

Deferred revenues  

        13,239

 

17,667

Other accounts payable and accrued expenses  

31,291

 

        37,248

Total current liabilities  

177,009

 

    205,499

 

LONG-TERM LIABILITIES:

       
Long term loan, net of current maturities  

-

 

2,072

Accrued severance pay and pension  

10,589

 

11,452

Other long term payables  

16,261

 

18,298

Total long-term liabilities  

26,850

 

31,822

 

SHAREHOLDERS' EQUITY:

       
Share capital:        
    Ordinary shares  

              212

 

              212

Additional paid-in capital  

406,986

 

    406,413

Treasury shares at cost  

    (20,091)

 

    (20,091)

Other comprehensive loss  

           (6,768)

 

           (4,111)

Accumulated deficits  

    (283,535)

 

    (277,871)

         
Total shareholders' equity  

   96,804

 

   104,552

         
Total liabilities and shareholders' equity  

$      300,663

 

$    341,873

 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(U.S. dollars, in thousands)

(Unaudited)

 

Three months ended

June 30,

 

Six months ended

June 30,

 

2015

 

2014

 

2015

 

2014

Cash flow from operating activities:              
Net income (loss)

$  1,331

 

$  7,998

 

$   (5,664)

 

$   (18,965)

Adjustments to reconcile net loss to net cash used in operating activities:              
               
Depreciation and amortization

2,719

 

3,530

 

         6,222

 

         6,908

Stock-based compensation expense

378

 

1,076

 

572

 

         2,123

Decrease (increase) in trade and other  receivables, net

4,487

 

(15,800)

 

19,356

 

(13,906)

Decrease in inventory, net of write off

4,539

 

1,420

 

9,648

 

3,029

Decrease in deferred tax asset, net

723

 

1,327

 

        1,453

 

        2,644

 Increase (decrease) in trade payables and accrued liabilities

(11,612)

 

6,139

 

(25,331)

 

(8,919)

Increase (decrease) in deferred revenues

1,049

 

3,946

 

(4,428)

 

1,047

Other adjustments

(83)

 

(570)

 

  (189)

 

   271

Net cash provided by (used in) operating activities

$ 3,531

 

$ 9,066

 

$ 1,639

 

$ (25,768)

Cash flow from investing activities:              
 Purchase of property and equipment

(1,431)

 

(3,328)

 

    (3,473)

 

    (6,178)

Investment in short-term bank deposits

(4)

 

-

 

(4)

 

-

Proceeds from short-term bank deposits

-

 

8

 

64

 

58

 Proceeds from sale and maturities of   marketable securities, net

-

 

-

 

122

 

5,161

Net cash used in investing activities

$ (1,435)

 

$ (3,320)

 

$  (3,291)

 

$  (959)

               
Cash flow from financing activities:              
Proceeds from bank loans

2,150

 

2,080

 

4,200

 

20,190

Repayment of bank loans

(2,058)

 

(2,058)

 

     (4,116)

 

     (4,116)

Net cash provided by financing activities

$  92

 

$  22

 

$  84

 

$  16,074

               
Translation adjustments on cash and cash equivalents

    $  77

 

$  52

 

$  (320)

 

$  121

Increase (decrease) in cash and cash equivalents

$  2,265

 

$  5,820

 

$  (1,888)

 

$  (10,532)

Cash and cash equivalents at the beginning of the period

37,270

 

26,055

 

41,423

 

42,407

Cash and cash equivalents at the end of the period

$  39,535

 

$  31,875

 

$  39,535

 

$  31,875

               
 
RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

(U.S. dollars in thousands, except share and per share data)

(Unaudited)

   

Three months ended June 30,

 

   

  2015

 

2014

   

GAAP (as reported)

 

Adjustments

 

Non-GAAP

 

Non-GAAP

                 
Revenues  

$  94,772

     

$  94,772

 

$  90,420

 
Cost of revenues  

     68,078

  $1(a)        403  

     67,675

 

     66,045

 
                   
Gross profit  

26,694

     

27,097

 

24,375

 
                   
Operating expenses:                  
Research and development  

5,770

  $1(b)        245  

5,525

 

7,689

 
Selling and marketing  

9,481

  $1(c)         150  

9,331

 

13,989

 
General and administrative  

5,525

  $1(d)        24  

5,501

 

5,283

 
                   
Total operating expenses  

20,776

     

$   20,357

 

$   26,961

 
                   
Operating income (loss)  

5,918

     

6,740

 

(2,586)

 
Financial expenses, net  

3,161

     

            3,161

 

             2,175

 
                   
Income (loss) before taxes  

2,757

     

3,579

 

(4,761)

 
                   
Taxes on income  

       1,426

  $1(e)       856  

570

 

260

 
                   
Net income (loss)  

$  1,331

     

 $   3,009

 

 $   (5,021)

 
                   
 

Basic net earnings (loss) per share

 

  $    0.02

     

  $    0.04

 

  $    (0.10)

 
                   
Diluted net earnings (loss) per share  

  $    0.02

     

  $    0.04

 

  $    (0.10)

 
                   
Weighted average number of shares used in computing basic net earnings (loss) per share  

77,170,030

     

77,170,030

 

52,457,168

 
 

Weighted average number of shares used in computing diluted net earnings (loss) per share

 

77,243,249

     

77,811,594

 

52,457,168

 
 

Total adjustments

     

1,678

       
                 
                                         

(a)     Cost of revenues includes $0.3 million of amortization of intangible assets, $0.1 million of changes in pre-acquisition indirect tax positions and $20 thousand of stock based compensation income in the three months ended June 30, 2015.

(b)     Research and development expenses include $0.2 million of stock-based compensation expenses in the three months ended June 30, 2015.

(c)     Selling and marketing expenses include $20 thousand of amortization of intangible assets and $0.1 million of stock based compensation expenses in the three months ended June 30, 2015.

(d)     General and administrative expenses include stock based compensation expenses in the three months ended June 30, 2015.

(e)     Taxes on income include non-cash tax adjustments in the three months ended June 30, 2015.

RECONCILIATION OF NON-GAAP FINANCIAL RESULTS

(U.S. dollars in thousands, except share and per share data)

(Unaudited)

   

Six months ended June 30,

 

   

  2015

 

2014

   

GAAP (as reported)

 

Adjustments

 

Non-GAAP

 

Non-GAAP

                 
Revenues  

$  188,425

     

$   188,425

 

$   160,935

Cost of revenues  

137,491

     

136,724

 

120,115

Gross profit  

     50,934

     

51,701

 

40,820

                 
Operating expenses:                
Research and development  

12,169

     

  11,828

 

  15,542

Selling and marketing  

20,789

     

20,367

 

28,394

General and administrative  

10,261

     

10,253

 

10,305

Restructuring costs  

1,225

 

    1,225

 

-

 

-

                 
Total operating expenses  

$   44,444

     

$  42,448

 

$  54,241

                 
Operating income (loss)  

6,490

     

9,253

 

(13,421)

Financial expenses, net  

       9,507

   (e)   2,973  

     6,534

 

     4,029

                 
Income (loss) before taxes  

(3,017)

     

2,719

 

(17,450)

                 
Taxes on income  

           2,647

   (f)    1,590  

          1,057

 

          447

                 
Net income (loss)  

$  (5,664)

     

$   1,662

 

$   (17,897)

                 
 

Basic net income (loss) per share

 

$     (0.07)

     

$     0.02

 

$     (0.34)

                 
Diluted net income (loss) per share  

$     (0.07)

     

$     0.02

 

$     (0.34)

 

Weighted average number of shares used in computing basic net earnings (loss) per share

 

77,158,982

     

77,158,982

 

52,457,168

Weighted average number of shares used in computing diluted net earnings (loss) per share  

77,158,982

     

77,796,494

 

52,457,168

                 
Total adjustments      

    7,326

       
                 

(a)     Cost of revenues includes $0.6 million of amortization of intangible assets, $0.1 million of changes in pre-acquisition indirect tax positions and $10 thousand of stock based compensation expenses in the six months ended June 30, 2015.

(b)     Research and development expenses include $0.3 million of stock-based compensation expenses in the six months ended June 30, 2015.

(c)      Selling and marketing expenses include $0.2 million of amortization of intangible assets and $0.2 million of stock based compensation expenses in the six months ended June 30, 2015.

(d)     General and administrative expenses include stock based compensation expenses in the six months ended June 30, 2015.

(e)     Financial expenses include the effect of re-measurement of certain assets denominated in or linked to the U.S. dollar in Venezuela, due to restrictive government policies on payments in foreign currency in the six months ended June 30, 2015.

(f)      Taxes on income include non-cash tax adjustments in the six months ended June 30, 2015.

RECONCILIATION BETWEEN REPORTED AND NON-GAAP

NET INCOME (LOSS)

(U.S. dollars in thousands)

(Unaudited)

   

Three months ended

   

Six months ended

   

June 30, 2015

             
Reported GAAP net income (loss)  

1,331

   

(5,664)

 
             
Stock based compensation expenses  

378

   

572

 
Amortization of intangible assets  

326

   

818

 
Restructuring expenses  

-

   

1,225

 
Changes in pre-acquisition indirect tax positions  

118

   

148

 
Currency devaluation in Venezuela  

-

   

2,973

 
Non-cash tax adjustments  

856

   

1,590

 
Non-GAAP net income  

3,009

   

1,662

 
               

###